Falcon Co. produces a single product. Its normal selling price is $30.00 per unit. The variable costs are $19.00 per unit. Fixed costs are $25,000 for a normal production run of 5,000 units per month. Falcon received a request for a special order that would not interfere with normal sales. The order was for 1,500 units and a special price of $20.00 per unit. Falcon Co. has the capacity to handle the special order and, for this order, a variable selling cost of $1.00 per unit would be eliminated.
1. If the order is accepted, what would be the impact on net income?
a. decrease of $750
b. decrease of $4,500
c. increase of $3,000
d. increase of $1,500
2.Should the special order be accepted?
a. Cannot determine from the data given
b. Yes
c. No
d. There would be no difference in accepting or rejecting the special order